Sarah E. Nadeau

Garan Lucow Miller presents its Windy City Seminar in the fall of each year at different locations around Chicagoland.  This free seminar has historically provided our insurance clients with updates on Michigan first party and third party No Fault claims, Indiana and Illinois first party and third party claims, as well as various other topics of interest, such as trial and deposition preparation, premises liability claims, and using social networking sites as a discovery tool.

In follow-up to the recent Windy City Seminar hosted by Garan Lucow Miller, P.C., the next two LawFax will provide analysis of several Illinois first-party and third-party decisions from 2013.  Below, are the first-party decisions.

Auto Owners Insurance Company v Yocum, et al, 987 N.E.2d 494 (ILL. App. 2013)

In this case, Auto Owners insured a truck owner.  Auto Owners filed a Declaratory Judgment Action against the truck owner, truck driver and trailer owner seeking a declaration that they had no duty to defend or indemnify an underlying wrongful death action.  The defendants counterclaimed alleging breach of contract, waiver and equitable estoppel and setting forth a claim for sanctions.  The Ogle County Trial Judge granted summary judgment in favor of the defendants and awarded them $926,979.97.  Auto Owners appealed, defendants’ cross-appealed.

On appeal, the Court held first that Auto Owners had no basis to cancel the automobile policy based on nonpayment of premium.  However, the Court went on to hold that Auto Owners was not subject to sanctions because it had not acted in bad faith and there was a bonafide dispute as to whether the policy was properly canceled.  Thus, there was no abusive discretion by Auto Owners.

State Farm Mutual Auto Insurance Company v Rodriguez, 987 N.E.2d 896 (ILL. App. 2013)

State Farm brought a Declaratory Judgment Action against two of its insureds, alleging that their policies did not provide comprehensive coverage on vehicles that had been seized by law enforcement authorities as stolen vehicles.  The Trial Court in Cook County granted summary judgment on behalf of State Farm in both actions and the insureds appealed.

The Court of Appeals held that whether the insureds had an insurable interest in the automobile was irrelevant to whether the policies provided coverage for the seizure of the automobiles by law enforcement authorities.  Further, the Court reasoned that the seizure of the insured’s automobiles did not constitute an insurable loss under the policies.  Finally, the Court of Appeals held that extrinsic evidence that State Farm had provided one insured with a rental vehicle after the seizure was inadmissible for the purpose of deciding whether the seizure constituted an insurable loss.

Delatorre v Safeway Insurance Company, 989 N.E.2d 268 (ILL. App. 2013)

An injured passenger, as assignee of the insured driver’s claims against Safeway Insurance Company, sued Safeway for breach of contract.  The Trial Court Judge in Cook County entered summary judgment in favor of the passenger awarding him $250,000.  Safeway appealed.

On appeal, the Court held that Safeway had breached its duty to defend.  Further, the Court held that Safeway was liable for the entire amount of the default judgment in excess of the policy limits.  In its holding, the Court stated that retaining an attorney for the insured, by itself, does not discharge an insurer’s duty to defend.  The Court also held that Safeway breached its duty to defend, where default judgment had been entered against the insured after the attorney had been retained, and where after sending the default order to the attorney, Safeway made no further effort to obtain explanation as to why the default was entered, or whether the attorneys sought to have it vacated, until over 3 years after the entry of the default judgment.  The Court further held that Safeway was liable for the entire amount of the default judgment against its insured in excess of the policy limits in the underlying personal injury action, given the original default was based on the insured’s “failure to comply with outstanding discovery,” and that the default judgment entered about 13 months after the default was caused by Safeway’s breach of its duty to defend.

McRoberts, et al v Porter, et al, 990 N.E.2d 922 (ILL. App. 2013)

An insured driver and passenger sued due to a motor vehicle accident.  Several healthcare providers filed liens pursuant to the Healthcare Services Lien Act.  The driver and passengers recovered $50,000 from the liability insurance carrier and another $50,000 in underinsured motorist benefits.  The plaintiffs then filed a petition to adjudicate the medical liens.  The Perry County Trial Judge entered orders applying the Lien Act to both recoveries.  The plaintiffs appealed.

On appeal, the Court of Appeals held that healthcare provider liens applied to the UIM benefits.  Thus, the providers were entitled to 40% of the UIM benefits.  The Court determined that the UIM coverage was a contractual claim, the resolution of which could be properly labeled a “settlement” to which a lien could attach under 770 I.L.C.S. 23/10(a), 23/20.

Hunt v State Farm Mutual Auto Insurance Company, 994 N.E.2d 561 (ILL. App. 2013)

An ambulance driver who obtained a judgment against another motorist following an accident filed Declaratory Judgment action, as the defendant/motorist’s assignee, against the defendant/motorist liability insurer for a declaration that State Farm (the defendant’s insurer) had breached its duty to defend the underlying lawsuit and was therefore estopped from denying coverage. The Trial Judge in Cook County granted State Farm’s motion for summary judgment and denied the ambulance driver’s cross-motion for summary judgment. The ambulance driver appealed.

The Court of Appeals held that State Farm had no duty to defend the underlying lawsuit if there was no insurance policy in existence at the time of the accident.  Further, the Court held that a form maintained by an insurer as proof of mailing of a policy cancellation notice was sufficient under the Illinois insurance code.

O’Connor v Country Mutual Insurance Company, 2013 WL 793131 (ILL.  App. 2013)

O’Connor sued Country Mutual for allegedly, unreasonably and vexatiously failing to settle her underinsured motorists claim.  The Kankakee County Trial Court ruled that O’Connor failed to prove the allegations in her complaint and entered judgment in favor of Country Mutual.

On appeal, the Court of Appeals held that Country Mutual’s conduct in settling O’Connor’s claim was not an unreasonable or vexatious refusal to pay a claim as required to entitle O’Connor to statutory damages.  Further, Country Mutual’s lack of a manual or procedure for evaluating claims did not constitute an improper claims practice.  Finally, the attorney-client privilege protected Country Mutual’s documents concerned with the preparation for litigation.

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Happy Thanksgiving!

From your Friends at Garan Lucow Miller